Discount rate for same NPV forum, posted, result, discount

cross-ied

i know this was posted somewhere but i cant seem to find the forum.


CF 1. -100, 36, 36, 36, 36 NPV 14.12 IRR 16.37
CF 2. -100, 0, 0, 0, 175, NPV 19.53, IRR 15.02


what discount rate would result in the same NPV for both projects?

Siddimaula

that's handy, correction the npv is 6.73 not discount rate....the discount rate is 13.16 so the difference in cash flows does work. sorry for the confusion there

Beatnik

The discount rate is 6.73% however you have to arrive at it by process of elimination. I think this problem in the book gave you about 5% ranges to save time.

kmf229

take the difference between the two cash flows, compute the irr. thats the rate at which the two npvs are equal.